Healthcare cost increases continue to decline: expected average increase is 10.6 percent, lowest in recent years, according to Aon Consulting

Risk & Insurance, Oct 1, 2008 by Erin Gazica

It may not bring the wave of relief employers would love to experience, but the latest healthcare cost survey from Aon Consulting Worldwide shows increases are the lowest they've been since 2001.

The division of Aon Corp. began the survey seven years ago, when the healthcare costs for HMOs were projected to increase by 16.2 percent. This year's survey projected an increase of 10.6 percent for HMOs, a marked improvement and slightly better than one year ago, which was 10.9 percent.

The expected increase in prescription drug costs is 9.2 percent, down from 9.5 percent last year; for specialty pharmacy costs, 12.2 percent, also down from the 15.1 percent expected one year ago. Projected rate increases for retirees are 7.3 percent for Medicare Supplement plans and 7.7 percent for Medicare Advantage plans, down from 11.2 percent and 9.2 percent, respectively, one year ago.

"While the medical trend rate is still more than twice the consumer price index, it is encouraging to see that healthcare cost rate increases are continuing to slow down," said John Zern, Aon Consulting's U.S. Health & Benefits practice director.

Bill Sharon, senior vice president and director of the study, credits the increasing number of employers and employees using wellness initiatives and consumer driven health plans. However, Sharon points out that more should be done on the part of management to support such programs and communicate more effectively with employees. The survey represents more than 70 healthcare insurers and reports predictions on increases in employer-provided health plan claims costs before any plan changes.

HEALTHCARE
COST INCREASES

Healthcare costs are increasing,
but not as quickly as previously.

                  SPRING   SPRING   SPRING
                   2006     2007     2008

MEDICAL--ACTIVITIES & RETIREES <65 (WITH RX)
HMO               12.2%    10.9%    10.6%
POS               11.9%    10.8%    10.5%
PPO               12.4%    11.2%    10.7%
Indemnity         14.4%    12.7%    12.4%
CDH               12.5%    10.7%    10.5%

MEDICAL--ACTIVITIES & RETIREES <65 (WITHOUT RX)
HMO               12.0%    11.0%    10.8%
POS               11.8%    10.9%    10.5%
PPO               12.3%    11.3%    10.9%
Indemnity         14.4%    13.1%    12.6%
CDH               12.3%    10.7%    10.3%

MEDICAL--RETIREES AGE 65  (WITH RX)
Medicare          11.5%    11.2%     7.0%
Supplement
Medicare          10.2%    12.0%     7J%
Advantage

MEDICAL-RETIREES AGE 65  (WITHOUT RX)
Medicare           9.9%     9.0%     7.3%
Supplement
Medicare           8.0%     8.0%     7.0%
Advantage

DENTAL
DHMO               4.8%    45.0%    42.0%
PPO
Indemnity          7.1%     7.1%     7.0%
                  17.0%    15.1%    12.2%

PHARMACY
General           12.2%     9.5%     9.2%
Specialty         17.0%    15.1%    12.2%

VISION
                   3.6%     3.1%     3.1%

SOURCE: AON CONSULTING WORLDWIDE